Big Three still face big climb

A day-long Senate Banking Committee Thursday sparked revived interest in crafting a bipartisan aid package that would keep Detroit’s Big Three out of bankruptcy but also demand concessions from labor and bond holders while encouraging more industry consolidation.

The path remains very steep; after the hearing ended, House and Senate leaders released a letter to President Bush again urging him to intervene in the auto crisis by using funds available to the Treasury under the financial markets rescue fund enacted this fall.

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This is the safer political course for Democrats given the voter antipathy to more bailouts, and Speaker Nancy Pelosi (D-Calif.) appears convinced that the White House will ultimately blink.

But both sides are playing a dangerous game, and Banking Committee Chairman Christopher Dodd appeared newly energized to try to salvage a bill after Republicans joined in peppering CEOs with ideas, including even a forced-marriage between Chrysler and General Motors Corp.

“I believe we have the makings of bringing something together,” said the Connecticut Democrat later. “My sense, as someone who’s been involved in this, is I have a working situation here and I’m going to try to get it done.”

Dodd’s ranking Republican, Alabama Sen. Richard Shelby, was unsparing through much of the six-hour ordeal. “Are you going to drive back?” Shelby asked with sarcasm, after the auto chiefs shed their corporate jets and arrived in hybrids from Detroit.

But other Republicans on the panel seemed to warm to the task, even going beyond Democrats in trying to impose their own industrial blueprint on the executives.

Sen. Robert Bennett (R-Utah) bluntly suggested that Chrysler and GM be required to consummate their recent corporate courtship. Adopting a folksy Tennessee style, Republican Sen. Bob Corker told GM’s G. Richard Wagoner that the government’s “big stick” could “actually cause your company for the first time in modern history to have the tools and the leverage to do the things that will make you strong for the future.”

Together with Ford Motor Co., Chrysler and GM are seeking upwards to $34 billion in loans and credit lines to weather the economic downturn and help the industry restructure itself.

Business plans submitted to Congress this week show the three have applied separately for $21.9 billion in Energy Department loans to retool plants and invest in new advanced technology vehicles. And Mark Zandi, chief economist for Moody’s Economy.com, told the Senate panel that the full cost of keeping the automakers afloat could be as high as $75 billion to $125 billion over the next two years.

Zandi said that bankruptcy itself would be “cataclysmic” and far more costly since Chapter 11 in today’s credit market could lead to liquidation. He urged lawmakers to provide the $34 billion but in two tranches, and with strict conditions to ensure the CEO’s keep “on script” with the reforms that have been promised.

The most immediate concern is GM, which estimates it needs $4 billion just to get through this month and up to $15 billion altogether through the end of March. Privately held Chrysler wants $7 billion altogether, $4 billion of which would be in the first quarter of 2009.